“It’s absolutely critical that Hong Kong is seen as having a clean, tough market with a strong regulator,” Martin Wheatley, chief executive of the Hong Kong Securities and Futures Commission, said in an interview. “It is important for the government to send a strong signal to the world, due to all the nervousness that Hong Kong will be sucked back to China and lose its uniqueness.”

Mr. Wheatley said last December that he would step down from the role he has held for the past six years to take the top securities regulation job in the U.K. But the government only began publicly soliciting applications for the next chief executive a little more than a week ago. The advertisement said the candidate should have at least 15 years of solid managerial experience at a regulatory authority, an exchange or in a related field.

Speaking during a visit to New York, Mr. Wheatley said an outsider, like himself, doesn’t have the baggage of connections within the industry and would be less susceptible to external influence. “But you have to do a lot more learning,” he said.

Hong Kong’s growing integration with and reliance on mainland China are already being manifest in various regulatory changes.

Exchange operator Hong Kong Exchanges & Clearing Ltd., led by former J.P. Morgan Chase & Co. banker Charles Li, in December amended its listing rules to allow Hong Kong-listed companies to use Chinese auditors and accounting standards, in addition to the widely accepted international financial reporting standards, or IFRS.

“There’s a strong view that Chinese players should be on the world stage. That’s fine if they are moving to that [global] standard,” Mr. Wheatley said.

However, he said the SFC worked to delay the implementation of those standards for about a year, fearing a weakening of standards in Hong Kong.

Mr. Wheatley said he is monitoring the situation to see if the new rules would pose a challenge in enforcement actions, but said, so far, cooperation with China’s securities authorities “works.”

The SFC also has taken a strong stance against stock trading by insiders ahead of earnings releases, and pushed for mandatory quarterly reporting. Hong Kong companies are only required to report earnings twice a year.

Over the course of his six-year tenure in Hong Kong, Mr. Wheatley earned a reputation as a proactive enforcer, combating insider trading and confronting some of Hong Kong’s biggest tycoons.

In January last year, the SFC excluded retail investors from the $2.6 billion initial public offering of Russian mogul Oleg Deripaska’s aluminum company UC Rusal Ltd. and required it to make such detailed disclosures that the prospectus ended up totaling 1,141 pages–including a cover page covered in red ink.

“We heard that we stepped in too far. But our role is to step in when it’s needed, and not just stand there with a tick-the-box mentality,” he said.

In February 2009, the SFC upset the business dealings of Richard Li, the son of Asia’s wealthiest businessman, alleging that a shareholder vote to approve a buyout deal had been rigged. An appeals court later found in favor of the SFC, scuttling the deal.

Mr. Wheatley, 51 years old, will step down in June, giving him a short break before he assumes a new role atop U.K.’s regulatory system. He will move to the Financial Services Authority in September before transitioning to head up the U.K.’s new consumer agency, the Consumer Protection and Markets Authority.

“I thought Hong Kong was tough, but the U.K. will be tougher given the high expectations of the legislature and the media. My primary aim is to set up a new infrastructure, stabilize the staff given the leadership vacuum and build a respected authority,” he said.

Before arriving at the SFC, Mr. Wheatley spent 18 years at London Stock Exchange Group PLC, including a stint as deputy chief executive officer.

While many credit Mr. Wheatley with clamping down on insider trading, he said he would rather be remembered for the work the SFC did after thousands of retail investors were hit with deep losses on complex structured products whose value evaporated after the collapse of Lehman Brothers Holdings Inc.

Despite criticisms that the SFC didn’t do enough to protect investors, the regulator worked with more than a dozen banks to have them repurchase the instruments, helping investors recoup some of their losses. On Tuesday, the Hong Kong unit of Standard Chartered PLC agreed to buy back $190 million worth of equity-linked structured notes issued and guaranteed by Lehman Brothers, covering more than 95% of their total value.

“We came from an unsatisfactory starting point, but nowhere else has the process gone so smoothly,” he said. He said the SFC is still negotiating with one other bank to hammer out an arrangement similar to the one struck with Standard Chartered.

Comments (1 of 1)

You wrote. "The SFC also has taken a strong stance against stock trading by insiders ahead of earnings releases". That is untrue. In late 2008 and early 2009 the SFC in fact took part in the campaign to undo changes to the "Blackout Rule" which the Stock Exchange Listing Committee had introduced. The SFC initially approved this rule. Then the tycoons objected, then the Government and the SFC pushed the Exchange into revoking the rule and replacing it with something much weaker.